In the 2nd quarter, aged inventory was cleared, the product
portfolio was streamlined and new competitive products – such as the
shatterproof DROID Turbo 2, Moto 360, and Vibe P1— were launched. A
redesigned mobile product development cycle will ensure products will be
competitive every season and every quarter. With restructuring complete,
Lenovo believes the MBG business turn around remains on track to reach
its break even goal in one to two quarters.

In Mobile, Lenovo volume was up 11 percent year-over-year with 18.8
million units sold, led by growth outside of China where it saw a 4.3
point increase in market share year-over-year driven by a shift in
strategic focus outside of China. In the first half of this fiscal year,
outside China accounted for 70 percent of volumes, while one year ago,
it was only 19 percent. In key emerging markets of Indonesia, Russia,
India and Brazil, Lenovo outgrew the smartphone market by 12, 175, 48
and 4 points respectively.

In the tablet market, Lenovo outgrew the market by almost 14 points with
nearly 1 percent growth verses a market decline of 12.6 percent. It
strengthened its worldwide #3 position with record high 6.3 percent
market share, selling 3.1 million units and taking share from the #1 and
#2 players.

In the Enterprise Business Group, or EBG, which includes servers,
storage, software and services sold under both the ThinkServer and
System x brands, sales were US$1.2 billion, up 5.5 times year-over-year
due to inclusion of System x this year. System x had approximately
US$900 million in sales. Overall, EBG achieved a major milestone with a
two percent revenue increase, on comparable basis, for the first time
since System x was acquired. In its fourth full quarter with System x,
EBG delivered operational pre-tax income, although its standard PTI –
which included non-cash, M&A-related accounting charges – was negative
US$33 million.

Major hyperscale wins with Alibaba, Tencent and Baidu drove
breakthroughs for the business. With new partnerships, including Nutanix
in hyperconverged infrastructure, and other with next generation data
center technology providers that will be announced soon, Lenovo has
better technologies than its competitors, a great product portfolio, and
the right cost structure. Lenovo remains confident that EBG will realize
$5 billion in revenue with good margin one year after the close of the
System x deal.

Geographic Overview

In China, consolidated sales in the second fiscal quarter,
declined by 12 percent year-over-year to US$3.3 billion, accounting for
28 percent of the Company’s worldwide sales. Operating margins fell 1.7
points to 4.1 percent. These declines were a result of performance in
mobile as the market continued to see hyper competition, carrier subsidy
cuts and continued shift to the online model. In PCs Lenovo maintained
stable market share and margin performance. In Enterprise, Lenovo saw
213 percent year-over-year revenue growth driven by strong ThinkServer
shipments with wins in a number of key hyperscale accounts, which
allowed it to strengthen its #1 position in the China x86 server market.

In the Asia Pacific region, Lenovo achieved sales across the
region of US$2 billion or 16 percent of Lenovo’s worldwide sales, while
operating margins were down 3.3 points to 1.1 percent because of
dampened Motorola performance. Lenovo Asia Pacific PC market share was
up 3.2 points year-over-year to a record 19.3 percent, recapturing the
#1 position. Remarkably, India grew 99 percent year-over-year, hitting
an impressive record-high 27 percent share. In Enterprise, Lenovo is
leveraging channel expertise to accelerate the business. In Mobile,
Lenovo had strong smartphone shipment growth of 135 percent
year-over-year, driven by strong momentum in India and inclusion of Moto.

Lenovo in Europe, Middle East & Africa had consolidated sales
in the second quarter of US$3.2 billion, a year-over-year increase of
six percent, hit by foreign exchange moves and a soft PC market. EMEA
accounted for 26 percent of Lenovo’s total worldwide sales. Operating
profit margin was 0.7 percent, a 3.1 points decrease year-over-year.
Lenovo was a solid #2 in the PC market overall, growing market share to
19.9 percent, up 0.6 percent year-over-year. In consumer PCs, it was #1
for the seventh consecutive quarter, clocking 21.5 percent share. In
Mobile, smartphone shipments registered very strong 101.8 percent
year-over-year growth for the combined business, when including Motorola
in the quarter one year ago for comparison purposes (when not including
Motorola in the quarter one year ago, year-over-year growth was 176.7
percent).

In the Americas, Lenovo saw consolidated sales grow 70 percent
year-over-year to approximately US$3.7 billion in the second quarter,
driven by the inclusion of the two acquisitions. This represented 30
percent of Lenovo’s total worldwide sales. Operating margin improved to
negative 2 percent, driven by improving Motorola performance. In PCs,
Lenovo Americas share was up 2.5 points year-over-year to 13.8 percent.
Lenovo North America and Latin America had record 13.3 percent and 15.3
percent share, respectively. In Mobile, new Motorola phones drove
quarter-to-quarter shipment improvements in North America, with 39
percent growth. In Enterprise, Lenovo is entering attack mode with
recently signed partnerships, which will capture opportunities by
offering technologies that disrupt entrenched computing models.

* see IDC data 3Q 2015

** As a Hong Stock Exchange-listed company, Lenovo’s official results
are presented using the Hong Kong Financial Reporting Standards (HKFRS).
This press release also contains a “run rate pre-tax income” figure,
which excludes the following items: Q2 restructuring costs of US$599
million; one time charges to clear smartphone inventories of US$324
million; and non-cash, M&A-related accounting charges, such as
intangible asset amortization, imputed interest expense of promissory
notes and others of US$85 million. This “run rate pre-tax income” is
provided as a supplemental metric to enable analysis of the
“like-to-like” performance of the underlying business. It is historical
in nature, and not meant to predict the rate of future performance.